Market Round-Up: 26 November – 30 November 2018

Last weekend was the easy bit; now comes the real Brexit work. Theresa May’s Brussels success may have been a step in the right direction but her Brexit deal comes laden with potentially destructive domestic caveats, namely parliamentary scrutiny when MPs come to vote on the deal in two weeks.

Caution was still the watch word on Monday, despite stock markets rallying on both sides of the channel. The more globally exposed FTSE 100 gained 1.2% with domestically focussed mid-caps adding around 1%. Financials, the sector that had been the most beaten up during previous weeks, were the main driving force, also reflecting news that Italy could lower its budget deficit target in order to avoid disciplinary procedures from Brussels.

More good news was to come for beleaguered stocks on Wednesday, on the back of comments from Federal Reserve Chair Jerome Powell, that interest rates were “just below” neutral, which propelled Wall Street higher on Wednesday. With Mr Powell indicating that there may not be the need to raise rates too many times next year, the US dollar naturally retreated, allowing emerging market and commodity indices to trace their way higher. The mining and oil-heavy FTSE 100 also rejoiced, bouncing in early trade before facing renewed selling.

Stoking investor unease towards domestic stocks was Bank of England Governor, Mark Carney, warning this week that Britain risks suffering an even bigger hit to its economy than during the global financial crisis ten years ago if it leaves the EU without a deal. “Our job is not to hope for the best but to prepare for the worst”, the man on Threadneedle Street said.

Behind all the happenings of the past week lurked the prospect, as it has done all year, of US-China trade wars. Talks between US President Donald Trump and Chinese Premier Xi Jinping are due to resume over the weekend at the G20 meeting in Buenos Aires. Word is, it takes two to tango in Argentina, but little is expected from the leaders of the world’s largest economies when it comes to conceding ground. With markets ebbing and flowing on mixed news before the conference, investors trod lightly towards the end of the week, with Friday seeing muted trading on most markets.

Adding to fears that US trade tariffs were already starting to have their desired effect, worrying data came from China on Friday. It highlighted sluggish growth in their vast manufacturing sector, which was shown to stall this month for the first time in more than two years.